While the USA might not be the strongest country any more, might not have the best infra-structure, or producing economy --- it for sure is still the epicenter of the financial markets.
With the elections behind us and some uncertainty lifted, what are the take-aways?
1) 16 of the DOW30 stocks trade below 200-day-moving-average; 15 of them look like a sell following my chart patterns. The markets dropped significantly with the DOW30 below 13.000, the S&P below 1.400 and the NASDAQ below 2.650.
My read: After the decisive outcome of the election we saw a short rally as this was better than a stalemate with weeks of discussion. But it seems, the market expected a Republican win and now hads lower. Also the focus has shifted from the elections to he fiscal cliff approaching in seven-league boots.
2) German market also look unhealthy, but at least still holds the 7.000 level. The MDAX is still within its upwards trend, but on the lower end. Germany clearly looks stonger than its European fellows - FTSE, CAC showing signs of late weakness. Only the ATX and SMI look as stable as Germany for the moment: same language, same thinking, same stock trend.
3) The EUR gained strength compared to the USD - or the USD lost ground ... My read is that here we see the same shift in focus than with regard to US stocks. Fiscal Cliff and discussion about the debt/deficit limits in the US are on the horizon. Last time Democrats and Republicans could kick the can down the road at the last moment - and it hurt the USD very much.
4) Gold/Silver was hammered last week - and I tried to get some but placed my limit a few bucks to low. With Obama in office, its back well above 1.700 USD - same chart for silver despite worries of a weakening economy. Gold in EUR is close to its all-time-high and approaching 1.400-levels now. Here I guess the market was anticipating a (chance of) more prudent fiscal and monetary policy from Romney/Rian. With that out of discussion - and Bernanke likely to stay - an upward trend from gold seems to develop.
5) Obamas victory speech was a first step towards the Republicans. I guess 50 % of his speech Romney could also have made ...
'... you hear the deep patriotism in the voice of the military spouses, working their phones late at night, to make sure that no one who fights for this country ever has to fight for a job or a roof over his head when they come home ...'
Obama or Romney?
So what are the takeaways:
- I expect US stocks and the USD to be somewhat depressed for the next weeks, unless Obama can put on a deal on fiscal cliff issues fast
- focus of US markets will be the US - so Europe is ganted some more time to move ahead
- whilst the elections might have had an impact on short term outlook of Gold, mid and long-term the USA, Europa and Japan can only try to inflate away their debt; the opportunity to buy precious metals lower is gone with Obama still in place
- Bernanke will not run for a 2nd term; I guess the rumors about him not doing so have been linked with the fear that a Republican president might not see him as first choice
- I would say there is a 75 % chance, that the fiscal cliff will be a fiscal hill - it would be unwise from both parties to stand by their left- or right-wing extremists and let the US run into very hard times. Instead they will fight for a compromise, kick the can down the road, both presenting themselves as victorious. They will strike a deal, where maybe taxes on the rich go up, but not the tax rates (by reducing exemptions). Where spending will be cut - but with room to point on the cuts the other side hurts more.
- Once the cliff is behind us and we cruise down the hill, big money will have accomplished something else: invested heavily in bonds they already have a guarantee to make an exit here with central banks buying up those papers (see QE3, Draghi comments in Europe, BoJ policy). Guaranteed sell at all-time-high prices. Instead of shifting to stocks now, those guys just have to wait for lower prices on stocks; so several weeks of discussions on the US debt, the fiscal policy - all with southwards impact on the equity-markets - will only second their goal.
Those are not markets any more. Maybe we should be worried about real output, production volumes, spending and saving - if we would have a market society any longer. Instead we have to analyze what fits into the strategy of the big players. What do European, Chinese and finally US politicians want to achieve? What game are the central banks playing? What is big money doing? You really think all the Wall Street guys out there do not know that bonds have never in history - never in history - been as much over-valued as they are today?
My tactical plan for the next weeks til year-end:
- lighten up on stocks when individual charts start to look ugly - rather not invest into new ideas until the fiscal cliff is hopefully eroded to a fiscal hill
- shift 30 % of my monthly equity-funds-purchasing programm into an alternative where I buy gold or silver
- play the USD/EUR FX rate
Have a good night and stay flexible!
No comments:
Post a Comment